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car buying edge article, car buying advice
car buying edge article, car buying advice
car buying edge article, car buying advice
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car buying - irs section 179 - car buying
car buying - irs section 179 - car buying
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car buying - irs section 179 - car buying
car buying - irs section 179 - car buying car buying - irs section 179 - car buying
BUYING A NEW CAR
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BUYING A USED CAR
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NEGOTIATING YOUR TRADE IN WHEN BUYING A CAR
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FINANCING OPTIONS FOR BUYING A CAR
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   Secure Financing Now
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   Looking for Financing
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   Get Your Own Financing
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   Dealer Financing
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   Secure a Loan Online
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   The Right Loan Term
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   Your Down Payment
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   Credit Union Loans
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   Improve Your Chances
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   Terms You Should Know
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   IRS Section 179
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   Online Loan Calculators
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   Refinance Your Loan
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LEASING VS. BUYING A CAR
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CAR BUYING EXTENDED WARRANTIES
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INSURANCE CONSIDERATIONS WHEN BUYING A CAR
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BUYING HYBRID CARS
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CAR BUYING NEGOTIATORS
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LEARN CAR BUYING DEALER SPEAK
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AUTO AUCTIONS
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Choosing Which Car To Buy
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Hot Car Buying Tips
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CAR BUYING CURRICULUM
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JC Whitney Sportsbook car buying edge article, car buying advice
car buying edge article, car buying advice
car buying - irs section 179 - car buying What is IRS Section 179? car buying - irs section 179 - car buying
car buying - irs section 179 - car buying

How Section 179 Can Save You Money on Your New or Used Car

Section 179 is a special additional depreciation deduction you can take in the year you purchase a new or used car. The election is made on an item-by-item basis for qualifying property and it must be made in the year the property is first placed in service. The expense deduction is available only if an auto is used more than 50% for business in the year that it is purchased and used in the business. You will need to document your mileage in a log to show your tax accountant proof of business use. If you are ever audited, the IRS will need to see at least 3 months of log records to validate your deduction. Commuting to a job is not deductible, unless it is your own business.

Know the Limitations on Section 179 Before Buying a Car

Any Section 179 claim will reduce the basis of the auto for purposes of claiming the special depreciation allowance and for purposes of computing regular MACRS depreciation. The total of these expenses may not exceed the statutory limitations, depending on when the new or used car was placed in service.

The limits are as follows (Year 2003-based on 100% business use):
  • Passenger Autos
    • If claiming 50% special depreciation, $10,710
    • If claiming 30% special depreciation, $7,660
    • If no special depreciation claimed, $3,060
  • Trucks and Vans
    • Add $300 to every category
  • Electric Vehicles
    • If claiming 50% special depreciation, $32,030
    • If claiming 30% special depreciation, $22,880
    • If no special depreciation claimed, $9,080

Vehicles Over 6,000 lbs in Weight

The following vehicles are just an example of vehicles over 6,000 lbs in weight that qualify for a special depreciation deduction : Chevy Suburban 1500, Chevy Tahoe, Ford Expedition, Ford F-150 Reg Cab, GMC Yukon, Toyota Land Cruiser, Toyota Sequoia SR5, Chevy Silverado 1500, BMW X5 SUV, MB ML 430 SUV. If the vehicle is used 50% or more in a business, you can write off up to 100% of the purchase price up to $102,000 in the first year of ownership if you buy and not lease the vehicle. The recapture period ends after three years. These rules fall under the Tax Growth and Resolutions Act of 2003.

Understand the Qualifying Terms Before Buying a Car

To qualify for the 50% special depreciation allowance, a vehicle must be acquired after May 5, 2003 and placed in service before January 1, 2005. The vehicle must also be new. The 30% special depreciation allowance does continue to be available for vehicles acquired and placed in service prior to May 6, 2003.

Be Aware of Section 179 Dangers and Pitfalls Before You Buy a Car

However, the tax benefit derived from a Section 179 election must be recaptured, if business use of the auto falls to 50% or less during the regular five year recovery period. This is generally regarded as ordinary income, but on a Schedule C or Schedule F (Farm income) it will also be subject to Social Security tax of 15.3%.

Section 179 Carryovers Can Save You Money When Buying a Car

There is, however, a carryover provision with any property cost that is not deductible in a tax year due to the taxable income limits. This is added to the cost of qualifying property placed in service in that tax year. As always, the tax laws in relation to automobile use are always changing, so it is always best to consult your tax adviser when purchasing or leasing a vehicle for business use. When it comes to tax savings, additional advantages of Section 179 are the following:

  • It may increase itemized deductions because of the AGI limits on various deductions
  • It may increase the earned income credit for taxpayers who file a Schedule C
  • It may help a taxpayer to qualify for an IRA deduction by reducing AGI
Learn more about Section 179 and SUVs in a special report on Edmunds.com.


car buying edge article, car buying advice
car buying edge article, car buying advice

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